Australian copper-gold miner OZ Minerals (ASX:OZL) has pulled the trigger on its $35 million underground copper-gold mine in Brazil’s minerals-rich Carajás region, following a series of inter-linked strategic agreements with Vale (NYSE: VALE), the country’s largest miner.
Since taking over Avanco Resources last year, Oz has been working towards transforming the small open-cut Pedra Branca mine into a larger underground operation.
The goal, it has repeatedly said, is to develop a hub-and-spoke mining complex around the Antas mine’s concentrate processing facility.
The Adelaide-based company
envisions a one-million-tonne-a-year underground operation with a mine life of
eight years, expected to have an annual production of about 18,000 tonnes of copper
and 11,000 ounces of gold.
Decline construction is expected to start in December and first development ore from Pedra Branca has been targeted for mid-2020
Decline construction will start in December and first development ore from Pedra Branca is expected in mid-2020, the company said.
Pre-concentrate ore from the Pedra
Branca mine will be trucked 75 km to the existing Antas plant, marking the
first spoke in Oz Minerals’ Carajás Antas hub.
The decision to go ahead with the mine
construction comes as the Australian company inked a number of agreements with
Vale, securing new momentum to its low-key, relatively low-cost entry into the
copper and gold mining sector in the South American country.
The deals will allow Oz Minerals to
accelerate progress and simplify activities thanks to the Brazilian mining
giant’s extensive support network.
The multilayered plan will see Vale
initially transporting Pedra Branca’s output to Antas, then marketing the
concentrate produced from that ore.
“The Vale Carajás concentrate sales agreement utilizes Vale’s extensive in-country transport infrastructure, which provides logistics and marketing cost savings, and simplifies our activities in the region,” Oz Minerals’ Brazilian boss, Carlos González, said in the statement.
The deal also contemplates the option to process the mine’s production at a Vale facility that is much closer to the mine than Antas. That alternative would be triggered if the plant fills up with production from other mines closer to it than Pedra Branca.
Hub in the making
The immediate advantage is a
capital and risk profile reduction of OZ Minerals’ first international endeavour,
while offering new medium-term opportunity and long-term upside.
Another plus is that Oz will have
the option of acquiring Vale’s share in two copper exploration projects in the
region, one of which is at a relatively mature stage.
The Aussie miner also announced it would exercise its option to purchase the Pantera advanced exploration project, which it acquired as part of the takeover of Avanco last year.
At around 1,800km2, Carajás is the
second largest land holding in a region known for iron oxide copper-gold deposits
of which Vale’s 200ktpa Salobo is the prime example.
It has similar geology to South Australia, where copper mines such as Oz’s Prominent Hill, and the soon to start producing Carrapateena, as well as BHP’s Olympic Dam are located.
